She generally tells the story aloud as she paints.  She had me write a bit of what went on in the upper left hand corner:  "Once upon a time there was a deer.  And she walked up here, there, across the bridge, and a river - and that's how she got lost."  She's illustrated the entirety of the deer's long journey in a map form below.  The triangular brush prints represent the deer's hoof prints.  She was lost and was searching for her home and her mother.  She traveled really far, around several lakes and across rivers.  You can see that along the way, she encountered houses, a garden, a forest, and several children.

Another game we play involves stickers or stamps.  Using the stickers/stamps, S creates a scene and presents it to my husband or me (or sometimes both) and we make up a story.  Once we've told a story involving all the characters pictured in the scene, S will take a turn and tell her own.  Sometimes she or I will challenge the other to tell a different story using the same scene.  

Another favorite activity is making her own books.  We generally aren't very fancy - we just fold up and staple some plain paper - but S very much enjoys being read her books for months after they've been made.  They are up on our bookshelf mixed in alongside all the other paperback and hardcover books.  :)  When S was much younger, I would illustrate for her.  Now that she's four, my job is solely to be the scribe and she's the illustrator.

Sometimes she recounts a story from real life - here she's talking about a trip to a store play area where she'd made a good friend the week before:

Other times, it's an imaginary story.  I cannot tell you how much I love that all her imaginative stories are about chickens.  They all start "once upon a time there was a chicken", and every time I die laughing.  She is too cute.

Another storytelling game we love involves our Memory game set.  To play you shake up all the cards and when it is your turn, you draw three cards.  You then tell a story that involves all three items.  If you pull a double, you can draw again (or you can work two of that item into the story).  If you don't have a Memory game set, you could make a set of these pretty easily yourself with clip art or by hand drawing pictures.  A nice balance of animals, food, and household items seem to make the best fodder for storytelling.

Small worlds are another great way to encourage storytelling.  S loves being able to manipulate the characters and scenery directly with her own hands.  We have several of our Simple Small Worlds up on the blog.  Here S is playing with Dinosaurs and Sticky Mud.  Lots of great stories about each of the dinosaurs and the trouble they were in - and how they were rescued!

And finally, S loves family stories.  One of her favorites to hear and then retell herself is the story of the day she was born.  I find that most children really enjoy their birth story and/or any silly stories from when they were small.  I love that this is great practice for her to understand and remember the sequence of a specific series of events and to learn a bit of her/our family history.

We first started storytelling activities when S was between 2 and 3.  When she was that young, I found that I needed to guide her stories a bit with questions like "who is this story about?" or "what happened next?" or "how did it end?".  As she has gotten older, she has begun to shape stories with beginnings, middles, and ends more independently.  I love hearing elements of stories we've read together manifest in her storytelling.  And of course, I am always up for a good chicken story.  :)

And be sure to check out the fabulous ideas from fellow bloggers shared as part of the Ready for Kindergarten book study here!